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New Delhi defends Air India sale conditions

New Delhi has defended the conditions of its failed bid to sell a 76% stake in Air India.

In a televised interview, minister of state for civil aviation Jayant Sinha says that the conditions "were balanced" but that "market conditions and industry dynamics were such that people were not enthused by what was on sale".

"If you look at what has been happening in the airline industry over the past six months to a year, with oil prices going up, interest rates going up, currency fluctuations, profitability has been hit very hard particularly for the full-service carriers. This proposition [Air India sale] may have been a tall order."

New Delhi offered to sell a 76% stake in Air India, which included its Air India Express subsidiary and a 50% stake in groundhandler Air India SATS. However, it failed to receive a single expression of interest from parties by the closing deadline of 31 May.

Observers have said that the major obstacles include the requirement for the new owners to take on half of the Star Alliance carrier's Rs488 billion ($7.47 billion) debt, plus about Rs88.2 billion in current liabilities, as well as the government's 24% stake meant significant involvement from New Delhi.

However, Sinha says that the government's stake "would only have been a passive one", given that it also has shares in national banks and manufacturing firms.

"In fact, the government's stake would have probably come down to between 18 and 20%. Our stake is there for the sake of the people to help absorb a lot of the debt. As the new owner creates value in Air India, then some of that financial upside would be shared with the state, who would pay down the debt."

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